ITP Techblog

The Covid-19 pandemic has caused plenty of supply chain issues for global tech companies - or rather it's brought them into sharp relief. The dependence on the Taiwan Semiconductor Manufacturing Company (TSMC), which is estimated to supply about half the world's computer chips, is one of them.

An article in Wall Street Journal this week revives talk that the Trump Administration is looking to TSMC to build a 'chip foundry' - that is, a factory that makes chips on contract for other companies - in the US. It is also in discussion with Intel, but the issue with that company is it makes chips for its own products, so naturally enough competitors are wary.

A Pentagon report last year warned that Taiwan, China and South Korea have become a "triad of dependency for the entire US digital economy". Especially Taiwan, which "represents a single point of failure for most of the United States' largest, most important technology companies."

According to the WSJ only three companies in the world can make the "fastest, most cutting-edge chip" and TSMC has about a 50% market share of the chip foundry business, counting Huawei and Apple among its customers.

The Trump Administration wants to move this manufacturing capability back to the US, but building a chip foundry is extremely expensive, upwards of $10 billion. The pristine premises in which the chips are created are a thousand times cleaner than a hospital operating room (I found that factoid on the Intel site).

Forbes commentator Willy Shih explains that to run a foundry efficiently you need different 'recipes': "One (recipe) for making the sensors for cell phones, one for making chips with integrated radios, or one that allows you to embedded flash memory for example. A foundry also has to balance a mix of customers that use different recipes simultaneously, instead of running a more limited range of processes to make large volumes of microprocessors. That's why even Intel sends some of its work to TSMC."

While the US weigh up the options, governments in China, Singapore and Israel are already joining Taiwan in making the investment in chip self-sufficiency. This is probably because, even when the Covid-19 pandemic has abated the geo-political issues with regards to Taiwan, and its relationship to China, are expected to remain. As our own Government was reminded today.